A Prenuptial Agreement (“Prenup”) is more than just a legally binding contract. Prenups can help create a solid foundation for how the financial aspects of your relationship will work during the marriage. This helps to build trust and effective communication moving forward. That makes it a wise investment. Negotiations should be conducted with a spirit of cooperation and transparency about financial matters. The goal is to enter the marriage with a full understanding of your situation and clarity on expectations.
A prenup is a healthy way to establish a balanced perspective and create equality in the decision-making process. It memorializes how separate property and marital property will be defined. Although New York Domestic Relations law determines property distribution in the event of divorce or death, courts will recognize a valid prenuptial agreement that may be different than New York law. Under New York Domestic Relations law, separate property is property acquired prior to the marriage; property acquired by inheritance (before or during the marriage); and by gift from a third party other than your spouse. You and your fiancé(é) can broaden the definition of separate property in a prenup. Many couples uniquely tailor what will be defined as separate property moving forward, modifying what is considered separate property under the law. Some concrete examples of provisions that can be uniquely tailored are: a) what happens to property acquired during the marriage with separate property and held in joint names; b) what happens in the event of a divorce or death to a primary residence (or other residence) that is the separate property of one party; c) whether separate property will pass to the surviving spouse upon death despite its nature as separate property; and d) whether the surviving spouse has the right to continue to reside at the property and, if so, for what period of time and how the carrying costs will be paid. Other couples address family business interests and/or how income earned during the marriage will be defined.
Here is a brief list of provisions that may be included in a prenup and tailored to meet the future spouses’ goals and needs:
- Defining separate property
- Defining marital property
- Retirement benefits accrued before/after the marriage date
- Procedures for filing tax returns, including allocating income and deductions
- Estate planning issues such as providing for children from a prior relationship or providing for family members from your family or origin
- Estate rights/Waiver of Estate Rights under applicable law
- Agreements regarding the acquisition of a primary or other residence
- Agreements regarding a business established prior to marriage
- Agreements regarding income earned during the marriage
- Procedure for how to manage any future disagreements, such as with the help of a financial neutral or mediator
A key factor to consider in arriving at a prenuptial agreement is providing for enough time before the marriage date to compile financial information, engage in meaningful negotiations and have a careful review by independent attorney. An experienced attorney will provide advice and counsel on relevant law and the practical impact of your decisions. The law in this area is complex and you should consult with an experienced attorney about how your unique situation may be addressed in a prenup and under relevant law.